Justice Department Amps Up War on Health Care Fraud

Now, in the wake of a $1.2 billion takedown by the U.S. Department of Justice, Chicago is doubling down on its efforts to fight health care fraud in America.

The Justice Department last week announced the formation of a new enforcement unit in Chicago to fight health care fraud. The Health Care Fraud Unit will prosecute defendants in all types of health care fraud, from providers who engage in fraudulent billing schemes to doctors who falsify patients’ diagnoses to justify expensive tests, the department said.

Joel R. Levin, acting U.S. attorney for the Northern District of Illinois, said the new crime unit will build on the Chicago area’s strong prosecution of health care fraud in recent years. “Health care fraud often exploits patients through unnecessary or unsafe medical procedures,” Levin said. “Health care providers who cheat the system must be held accountable.”

The new Chicago unit will include five prosecutors led by assistant U.S. Attorney Heather McShain. Assistant U.S. Attorney Stephen Chahn Lee will serve as the unit’s senior counsel.

Earlier this month, the Chicago office participated in the largest health care fraud enforcement action in the Justice Department history, and the Chicago office recently secured 10 criminal convictions as part of a multi-year investigation into Sacred Heart Hospital in Chicago.

For more than a decade, Sacred Heart executives paid kickbacks and bribes to physicians to induce them to refer patients for services that would be reimbursed by Medicare and Medicaid, according to the Justice Department. The fraud scheme plowed millions of dollars from Medicare and Medicaid to Sacred Heart, the department said. The convictions include Edward Novak, the hospital’s owner and chief executive officer; Roy Payawal, the chief financial officer; Clarence Nagelvoort and Anthony J. Puorro, chief operating officers; physician Venkateswara Kuchipudi, and four other physicians. Sacred Heart closed in 2013.

Chicago attorney Patrick Cotter, head of the Government Interaction and White Collar Practice Group at Greensfelder, Hemker & Gale, P.C. in Chicago, said the government’s increased health care fraud efforts are a response to the city’s high concentration of health care companies.

The federal government is also partnering with state prosecutors around the country to coordinate enforcement efforts, Cotter said.

“More money and more prosecutors, the establishment of multi-agency health care task forces … all make it clear that the feds have moved health care fraud up to one of their top priorities,” Cotter said.

Fighting health care fraud can be a political move. Cotter said he thinks the Obama administration may have been motivated to show that the health care system could be regulated and policed, which would justify putting more tax dollars into it.

“Perhaps ironically, the new administration also has political/policy motives for increasing criminal health care prosecutions,” Cotter said. “I think it is no accident that the current administration would look hard to prosecute and publicize any fraud they can find in the current health care system while at the same time fighting to reduce the government’s role and financial support for that health care system. The more corrupt the current system is, the easier it is to argue against expanding the funding and scope of that same system.”

The feds have taken some major steps in the last month.

One of the largest fraud cases announced this year was a $158 million fraud case involving outpatient psychiatric care.

After a five-day trial, Riaz Mazcuri, 65, of Harris County, Texas, was convicted earlier this month on one count of conspiracy to commit health care fraud and five counts of health care fraud. Sentencing has been scheduled for Oct. 10 before U.S. District Judge Vanessa D. Gilmore of the Southern District of Texas, who presided over the trial.

According to the Justice Department, from 2006 until February 2012, Mazcuri and others defrauded Medicare by submitting $158 million in bills, through Riverside General Hospital, for outpatient mental health services.

While the feds have gone after some big-ticket busts, Cotter said it seems that the current administration may be focused on smaller – though more plentiful and easier to convict – targets. Cotter said that in this month’s $1.2 billion takedown of healthcare fraud criminals, “there was not a single large health care provider company named in any of the many indictments.”

The cost of health care fraud in America is staggering. In the last year the Justice Department has won or negotiated over $2.5 billion in judgments and settlements in healthcare fraud. The department’s Medicare Fraud Strike Force operates in nine cities nationwide.

Earlier this month, the department charged 412 defendants across 41 federal districts, including 115 doctors, nurses and other licensed medical professionals, on suspicion of participating in health care fraud schemes involving approximately $1.3 billion in false billings. Of those charged, over 120 defendants, including doctors, are suspected of prescribing and distributing opioids and other dangerous narcotics.

Prescription fraud

On July 17, Tamara Mitchell of Fulshear, Texas, received a 14-year prison sentence for billing out $17 million in pharmaceutical hand creams over just two years.

Mitchell owned two pharmacies, Diamond and Save Rite, that sold creams containing controlled substances. Mitchell’s pharmacies sold these compounded creams containing ketamine to the public by using pre-signed prescriptions to fill orders for customers who had the right insurance plans, according to the Justice Department.

The people who received the creams were never examined by a doctor and the submissions to the insurance providers contained misrepresentations regarding the medical need. One person who bought creams from Mitchell died from ketamine poisoning, prosecutors said.

Under Mitchell’s direction, Diamond and Save Rite falsely billed insurance companies for more than $17 million in just two years, according to the Justice Department.

Cotter, at Greensfelder, Hemker & Gale, said there has been a shift in the last few years in the mindset of federal prosecutors as to how they view what were formerly civil penalties for fraud.

“Failures to follow all of the many byzantine rules, regulations and policies of Medicaid only a few short years ago would have been addressed by fines and other civil penalties.” Cotter said, adding that those violations are now more often being viewed as worthy of criminal prosecution.

The law gives federal prosecutors a wide amount of discretion in this area to decide what is a crime and what is a mistake worthy of a civil resolution, according to Cotter.

“There can be no question that when the DOJ makes healthcare fraud prosecutions such a centerpiece of their efforts, the U.S. attorneys and rank-and-file around the country get the message and are ever more ready to bring such prosecutions,” Cotter said.